Top Funds' Activity in Q4 2018

Melissa Karsh, Saijel Kishan, and Alexandra Stratton of Bloomberg report, Hedge Funds From Appaloosa to Third Point Slash Stocks: 13F Wrap:
Hedge fund managers were busy protecting performance and taking risk off the table in the fourth quarter, according to regulatory filings Thursday.

Many saw the value of their U.S. equity holdings drop in the period, as the industry careened toward its worst year since 2011. Some came from losses amid market volatility while others resulted from stock sales to reduce risk or meet client redemptions. Investors pulled $42.3 billion from hedge funds, the most in at least five years, industry tracker BarclayHedge said in a report.

Billionaire David Tepper’s hedge fund greatly reduced its holdings of U.S.-listed stocks in the fourth quarter. The value of Appaloosa’s stakes fell 64 percent to $2.02 billion. That compares with a 14 percent decline in the S&P 500 index. Dan Loeb’s Third Point saw the value of its equity holdings fall by about half, or $6 billion, in the quarter.

Here are some other key takeaways from the latest 13F filings, which show the U.S. stock holdings of money managers with more than $100 million:
  • One surprise was hedge fund managers’ interest in timeshares. David Einhorn built a position in Hilton Grand Vacations Inc., along with Highfields Capital Management, Davidson Kempner and Senvest Management.
  • Two stocks in focus last quarter were embattled General Electric Co. and PG&E Corp. Viking Global Investors exited its stake in GE, worth about $1.5 billion. Hedge funds were mixed on PG&E. Baupost pared its holding in the California utility, Viking exited and BlueMountain Capital Management boosted. Appaloosa added marginally, leaving the hedge fund with a position worth $153.6 million as of Dec. 31.
  • When it comes to the FAANG stocks, one of the most notable moves was by Chase Coleman’s Tiger Global Management, which cut its Amazon.com Inc. stake by more than a Third. Steve Mandel’s Lone Pine Capital sold its $1 billion stake in Alphabet Inc., the parent of Google.
  • Alibaba was a popular tech stock for some. Viking and Coatue Management each added to their positions in the Chinese e-commerce company. But Tepper’s Appaloosa axed its entire position, selling 1.5 million shares worth about $247 million.
  • Managers streamed out of Spotify Technology SA. Steve Cohen’s Point72 Asset Management, Moore Capital Management and Wexford Capital reduced their positions while Lee Ainslie’s Maverick Capital exited completely. But Spotify was Tiger Global’s largest U.S. equity position.
  • A new darling: Anaplan Inc., a business-planning software company that went public in October after hiring former Tesla Inc. executive Dave Morton as its chief financial officer. It was a favorite of Baillie Gifford, TIAA, Coatue Management and Alkeon Capital Management.
  • While not a hedge fund, Warren Buffett’s Berkshire Hathaway reported one of the biggest surprises. It exited its $2 billion stake in Oracle. The news sent the software company’s shares lower.
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It's that time of the year again when we get to peek into the portfolios of the world's top asset gatherers money managers and see what they did in the previous quarter.

Before I go over what top funds bought and sold in Q4 2018, it's worth noting a few things:
  • First, it was another brutal year for hedge funds last year. Redemptions came in fast and furious at the end of the year, exacerbating the bad Santa selloff of 2018. It's critically important for small and large investors to understand market dynamics, including hedge fund and mutual fund redemptions, and big pension and sovereign wealth funds rebalancing at the end of a terrible quarter for stocks. Those of you looking for more details can read my Boxing Day 2018 comment on making stocks great again
  • Second, even top hedge funds and other top funds got clobbered in stocks last year. If you go over 2018's winners and losers, you'll see the top funds were  global macro funds like Bridgewater which took top spot and quant funds like Citadel and Renaissance Technologies which performed well in a very difficult market. Importantly, most Long/ Short hedge funds got killed last year because they're is way too much beta in their portfolios and to be frank, most are terrible at managing downside risk which is why they typically perform better in a rising market (just like most mutual funds).
  • Most L/S equity hedge funds trade large cap stocks because they're liquid and they can enjoy nice swings in some sectors, like technology, a favorite of hedge funds.
  • The last point I wanted to make is investors may have already missed out on the bulk of the market's gains this year, so you really need to be careful interpreting 13-F filings which are lagged by 45 days and tell you absolutely nothing about what top funds are currently buying and selling. 
I've said this before and it's worth repeating, in the hands of a novice investor, this data is dangerous and potentially disastrous. Never, ever follow top funds blindly because you risk getting your head handed to you.

How rough is it out there for L/S equity funds? Just ask Stephen Mandel, founder of Lone Pine Capital and a hedge fund manager who boasts one the best long-term track records in the industry. He decided to step down in January but the fund will continue to operate under the direction of David Craver, Mala Gaonkar and Kelly Granat.

What about following Warren Buffett blindly? Even that is foolish. Buffett's public stock picks suffered a terrible year last year. He obviously has a great long-term track record but unlike you or me, Buffett has very deep pockets and he can add to his holdings when they get clobbered, sit and wait for them to recover.

He also has access to preferred shares and other goodies that most investors can only dream of (like his private market holdings which are doing well and his ability to take massive derivatives bets on the S&P if things don't go well), so don't follow Berkshire's portfolio blindly but definitely look at it every quarter (also, because of his age, Buffett has given his lieutenants more power to make decisions at Berkshire; for example, the fund trimmed its stake in Apple but it wasn't his idea).

Anyway, you get the gist of what I'm saying, it's fun looking at portfolio moves of the word's top fund managers but you need to be aware of what is happening in markets real time and manage your downside risk to become a great money manager, so use this information as part of a toolkit, never blindly following their moves.

To track stocks in real time, at the end of the day, I visit barchart.com and look at several things:
I then go to stockcharts.com and look at a bunch of daily and weekly charts of stocks that interest me. The ones that pass my screens make it on my watch list in my Yahoo portfolios and the ones that don't still make it into my sector or industry watch lists (track over 2000 stocks).

Lastly, I also look at what top funds are buying and selling every quarter to get ideas of stocks worth looking at.

Below, I will share a few examples but please do your own due diligence and don't take this as investment advice.

First, let's look at eBay (EBAY) which a number of hedge fund activists loaded up on. You can easily see which are the top institutional holders by going to Nasdaq.com, typing in EBAY in the box where it says enter the ticker symbol and then scrolling down the left-hand side all the way close to the bottom and click on the link which says institutional holdings. Once there, you will see the following (click on image):


You'll notice the regular big funds, Vanguard, Blackrock, etc., but you will also see Seth Klarman's Baupost initiated a new position and top quant fund D.E. Shaw increased its stake by 40%.

Then, if you click on the fourth column, Change (%), you will see which funds increased their stake in Q4 (click on image):


Here I see a couple of other hedge funds I know, like Paloma and Adage Capital.

I then go to stockcharts.com and look at the daily one-year chart and weekly five-year chart of eBay (click on images, you get these charts for free on stockcharts, just play with settings):



As shown, eBay's shares already experienced a huge move from the December lows, just like many stocks, but the weekly MACD just crossed into positive territory which is postive and suggests momentum will continue.

Does this guarantee upward momentum will continue and eBay's shares will continue higher and make new highs? Of course not but it's worth tracking going forward. Just keep in mind the big money was gained by buying the big dip in Q4 which top funds did (you have to know when to pull the trigger!).

Next, let's look at another one, Electronic Arts (EA), a top holding of Steve Cohen's Point72 Asset Management for quite some time now (see his top holdings here and below). The top institutional holders are well-known large asset managers, but when I click on the fourth column, Change (%), I see two top quant hedge funds, Two Sigma and Renaissance Technologies, increased their stake in Q4 (click on image):


When I look at the 5-year weekly chart of Electronic Arts, I see it's coming up to resistance at its 50-week moving average but it also made a nice move since the December lows and is worth tracking (click on image):


But you will notice the weekly MACD is still negative, which tells me the signal isn't as strong as it is with eBay's shares.

Let's go over one last one, a core long of mine, Teva Pharmaceuticals (TEVA). It reported earnings earlier this week, got hit on Wednesday and I used that pullback to add to my position at the open.

When you look at the top institutional holders of Teva, you will see familiar big funds like Fidelity which increased its stake by 43% in Q4, Berkshire which maintained its 43 million-share stake (not Buffett's idea to buy this one), and less well-known names like Abrams Capital run by David Abrams, a disciple of Seth Klarman and one of the best value managers (click on image):


You will also see top quant fund, Renaissance Technologies, doubled its stake in Q4 to just under 7 million shares.

Now, let's look at the 5-year weekly chart of Teva (click on image):


It's nothing exciting, the stock remains below its 50-week moving average, the weekly MACD signal isn't strong but I like the company on a fundamental basis and think it has more room to run higher over the next couple of years as global growth slows.

And by fundamental, I'm not just talking price-to-sales, which is extremely low, I'm talking about the macro environment too, which is why I continue to like healthcare stocks as we enter the last stage of the cycle (see my latest macro comment here).

Let's look at a fourth example, Goldman Sachs (GS), one of the easiest swing trades from the December lows in my opinion. First, the top institutional holders of the stock (click on image):


Again, well-known names, Vanguard, BlackRock, State Street (index providers) and Buffett's Berkshire.

Now, let's look at who increased their stake the most in Goldman in Q4 2018. Here, it gets interesting, you see Ontario Teachers' Pension Plan and Bridgewater Associates, the top-performing large hedge fund last year, both increased their stake in Goldman quite markedly in Q4 (click on image):


Next, let's look at the five-year weekly chart of Goldman (click on image):


I've shown this chart before. Do you see how it fell below its 400-week moving average in late December? In my opinion, it was way, way oversold and that was the time to buy the big dip and sit and wait for it to recover.

But you will also notice, shares are unable to break above the 200-week moving average, which tells me there's still some weakness to contend with here. In order to resume an uptrend, the stock has to break above this level or else it remains in a bear market.

Let me go over a fifth and last example, Ellie Mae (ELLI), the mortgage software company which was recently acquired by private equity fund Thoma Bravo in a $3.7 billion deal, sending the shares soaring over 20% after the announcement and capping a spectacular recovery from the December lows (click on image):


If you look at the top institutional holders of Ellie Mae, you will find some well-known hedge funds like Eminence Capital but less well-known asset managers like Brown Capital Management based in Baltimore and Van Berkom and Associates based here in Montreal, a firm that specializes in global small-cap stocks (click on image):


I looked into the top holdings of Black Capital Management and Van Berkom and Associates and was very impressed which tells you sometimes it's worth looking at the smaller shops for the best ideas.

In this comment, I gave you five examples of stocks I track, I can give you 100 more but it's up to you to do your own homework to find stocks you like in whatever industry and do your own screening.

I'll end it there. I hope you enjoyed reading this comment and all the others I posted this week. As always, I ask all my readers to please donate or subscribe via PayPal on the right-hand side, under my picture. I thank all of you who take the time to donate, it's greatly appreciated.

Have fun looking at the fourth quarter activity of top funds listed below. The links take you straight to their top holdings and then click on the fourth column head to see where they increased and decreased their holdings (click once to see decreased and sold out twice on Chg % column head to see where they increased; sometimes it's the opposite so pay around by clicking in the column head).

Top multi-strategy and event driven hedge funds

As the name implies, these hedge funds invest across a wide variety of hedge fund strategies like L/S Equity, L/S credit, global macro, convertible arbitrage, risk arbitrage, volatility arbitrage, merger arbitrage, distressed debt and statistical pair trading.

Unlike fund of hedge funds, the fees are lower because there is a single manager managing the portfolio, allocating across various alpha strategies as opportunities arise. Below are links to the holdings of some top multi-strategy hedge funds I track closely:

1) Appaloosa LP

2) Citadel Advisors

3) Balyasny Asset Management

4) Farallon Capital Management

5) Peak6 Investments

6) Kingdon Capital Management

7) Millennium Management

8) Eton Park Capital Management

9) HBK Investments

10) Highbridge Capital Management

11) Highland Capital Management

12) Hudson Bay Capital Management

13) Pentwater Capital Management

14) Och-Ziff Capital Management

15) Pine River Capital Capital Management

16) Carlson Capital Management

17) Magnetar Capital

18) Mount Kellett Capital Management 

19) Whitebox Advisors

20) QVT Financial 

21) Paloma Partners

22) Weiss Multi-Strategy Advisors

23) York Capital Management

Top Global Macro Hedge Funds and Family Offices

These hedge funds gained notoriety because of George Soros, arguably the best and most famous hedge fund manager. Global macros typically invest across fixed income, currency, commodity and equity markets.

George Soros, Carl Icahn, Stanley Druckenmiller, Julian Robertson and now Steve Cohen have converted their hedge funds into family offices to manage their own money and basically only answer to themselves (that is my definition of true investment success).

1) Soros Fund Management

2) Icahn Associates

3) Duquesne Family Office (Stanley Druckenmiller)

4) Bridgewater Associates

5) Pointstate Capital Partners 

6) Caxton Associates (Bruce Kovner)

7) Tudor Investment Corporation (Paul Tudor Jones)

8) Tiger Management (Julian Robertson)

9) Discovery Capital Management (Rob Citrone)

10 Moore Capital Management

11) Point72 Asset Management (Steve Cohen)

12) Bill and Melinda Gates Foundation Trust (Michael Larson, the man behind Gates)

13) Joho Capital (Robert Karr, a super succesful Tiger Cub who shut his fund in 2014)

Top Quant and Market Neutral Hedge Funds

These funds use sophisticated mathematical algorithms to make their returns, typically using high-frequency models so they churn their portfolios often. A few of them have outstanding long-term track records and many believe quants are taking over the world. They typically only hire PhDs in mathematics, physics and computer science to develop their algorithms. Market neutral funds will engage in pair trading to remove market beta.

1) Alyeska Investment Group

2) Renaissance Technologies

3) DE Shaw & Co.

4) Two Sigma Investments

5) Cubist Systematic Strategies (a quant division of Point72)

6) Numeric Investors

7) Analytic Investors

8) AQR Capital Management

9) SABA Capital Management

10) Quantitative Investment Management

11) Oxford Asset Management

12) PDT Partners

13) Princeton Alpha Management

14) Angelo Gordon

15) Quantitative Systematic Strategies

16) Bayesian Capital Management

17) Quadrature Capital

Top Deep Value, Activist, Event Driven and Distressed Debt Funds

These are among the top long-only funds that everyone tracks. They include funds run by legendary investors like Warren Buffet, Seth Klarman, Ron Baron and Ken Fisher. Activist investors like to make investments in companies where management lacks the proper incentives to maximize shareholder value. They differ from traditional L/S hedge funds by having a more concentrated portfolio. Distressed debt funds typically invest in debt of a company but sometimes take equity positions.

1) Abrams Capital Management (the one-man wealth machine)

2) Berkshire Hathaway

3) Baron Partners Fund (click here to view other Baron funds)

4) BHR Capital

5) Fisher Asset Management

6) Baupost Group

7) Fairfax Financial Holdings

8) Fairholme Capital

9) Trian Fund Management

10) Gotham Asset Management

11) Fir Tree Partners

12) Elliott Associates

13) Jana Partners

14) Gabelli Funds

15) Highfields Capital Management 

16) Eminence Capital

17) Pershing Square Capital Management

18) New Mountain Vantage  Advisers

19) Atlantic Investment Management

20) Scout Capital Management

21) Third Point

22) Marcato Capital Management

23) Glenview Capital Management

24) Apollo Management

25) Avenue Capital

26) Armistice Capital

27) Blue Harbor Group

28) Brigade Capital Management

29) Caspian Capital

30) Kerrisdale Advisers

31) Knighthead Capital Management

32) Relational Investors

33) Roystone Capital Management

34) Scopia Capital Management

35) Schneider Capital Management

36) ValueAct Capital

37) Vulcan Value Partners

38) Okumus Fund Management

39) Eagle Capital Management

40) Sasco Capital

41) Lyrical Asset Management

42) Gabelli Funds

43) Brave Warrior Advisors

44) Matrix Asset Advisors

45) Jet Capital

46) Conatus Capital Management

47) Starboard Value

48) Pzena Investment Management

49) Polaris Capital Management

Top Long/Short Hedge Funds

These hedge funds go long shares they think will rise in value and short those they think will fall. Along with global macro funds, they command the bulk of hedge fund assets. There are many L/S funds but here is a small sample of some well-known funds.

1) Adage Capital Management

2) Viking Global Investors

3) Greenlight Capital

4) Maverick Capital

5) Pointstate Capital Partners 

6) Marathon Asset Management

7) Tiger Global Management (Chase Coleman)

8) Coatue Management

9) Omega Advisors (Leon Cooperman)

10) Artis Capital Management

11) Fox Point Capital Management

12) Jabre Capital Partners

13) Lone Pine Capital

14) Paulson & Co.

15) Bronson Point Management

16) Hoplite Capital Management

17) LSV Asset Management

18) Hussman Strategic Advisors

19) Cantillon Capital Management

20) Brookside Capital Management

21) Blue Ridge Capital

22) Iridian Asset Management

23) Clough Capital Partners

24) GLG Partners LP

25) Cadence Capital Management

26) Karsh Capital Management

27) New Mountain Vantage

28) Penserra Capital Management

29) Eminence Capital

30) Steadfast Capital Management

31) Brookside Capital Management

32) PAR Capital Capital Management

33) Gilder, Gagnon, Howe & Co

34) Brahman Capital

35) Bridger Management 

36) Kensico Capital Management

37) Kynikos Associates

38) Soroban Capital Partners

39) Passport Capital

40) Pennant Capital Management

41) Mason Capital Management

42) Tide Point Capital Management

43) Sirios Capital Management 

44) Hayman Capital Management

45) Highside Capital Management

46) Tremblant Capital Group

47) Decade Capital Management

48) T. Boone Pickens BP Capital 

49) Bloom Tree Partners

50) Cadian Capital Management

51) Matrix Capital Management

52) Senvest Partners

53) Falcon Edge Capital Management

54) Park West Asset Management

55) Melvin Capital Partners

56) Owl Creek Asset Management

57) Portolan Capital Management

58) Proxima Capital Management

59) Tourbillon Capital Partners

60) Impala Asset Management

61) Valinor Management

62) Marshall Wace

63) Light Street Capital Management

64) Honeycomb Asset Management

65) Rock Springs Capital Management

66) Rubric Capital Management

67) Whale Rock Capital

68) Suvretta Capital Management

69) York Capital Management

70) Zweig-Dimenna Associates

Top Sector and Specialized Funds

I like tracking activity funds that specialize in real estate, biotech, healthcare, retail and other sectors like mid, small and micro caps. Here are some funds worth tracking closely.

1) Armistice Capital

2) Baker Brothers Advisors

3) Palo Alto Investors

4) Broadfin Capital

5) Healthcor Management

6) Orbimed Advisors

7) Deerfield Management

8) BB Biotech AG

9) Birchview Capital

10) Ghost Tree Capital

11) Sectoral Asset Management

12) Oracle Investment Management

13) Perceptive Advisors

14) Consonance Capital Management

15) Camber Capital Management

16) Redmile Group

17) RTW Investments

18) Bridger Capital Management

19) Boxer Capital

20) Bridgeway Capital Management

21) Cohen & Steers

22) Cardinal Capital Management

23) Munder Capital Management

24) Diamondhill Capital Management 

25) Cortina Asset Management

26) Geneva Capital Management

27) Criterion Capital Management

28) Daruma Capital Management

29) 12 West Capital Management

30) RA Capital Management

31) Sarissa Capital Management

32) Rock Springs Capital Management

33) Senzar Asset Management

34) Southeastern Asset Management

35) Sphera Funds

36) Tang Capital Management

37) Thomson Horstmann & Bryant

38) Venbio Select Advisors

39) Ecor1 Capital

40) Opaleye Management

41) NEA Management Company

42) Great Point Partners

43) Tekla Capital Management

44) Van Berkom and Associates

Mutual Funds and Asset Managers

Mutual funds and large asset managers are not hedge funds but their sheer size makes them important players. Some asset managers have excellent track records. Below, are a few funds investors track closely.

1) Fidelity

2) Blackrock Fund Advisors

3) Wellington Management

4) AQR Capital Management

5) Sands Capital Management

6) Brookfield Asset Management

7) Dodge & Cox

8) Eaton Vance Management

9) Grantham, Mayo, Van Otterloo & Co.

10) Geode Capital Management

11) Goldman Sachs Group

12) JP Morgan Chase & Co.

13) Morgan Stanley

14) Manulife Asset Management

15) RCM Capital Management

16) UBS Asset Management

17) Barclays Global Investor

18) Epoch Investment Partners

19) Thornburg Investment Management

20) Legg Mason (Bill Miller)

21) Kornitzer Capital Management

22) Batterymarch Financial Management

23) Tocqueville Asset Management

24) Neuberger Berman

25) Winslow Capital Management

26) Herndon Capital Management

27) Artisan Partners

28) Great West Life Insurance Management

29) Lazard Asset Management 

30) Janus Capital Management

31) Franklin Resources

32) Capital Research Global Investors

33) T. Rowe Price

34) First Eagle Investment Management

35) Frontier Capital Management

36) Akre Capital Management

37) Brandywine Global

38) Brown Capital Management

39) Victory Capital Management

Canadian Asset Managers

Here are a few Canadian funds I track closely:

1) Addenda Capital

2) Letko, Brosseau and Associates

3) Fiera Capital Corporation

4) West Face Capital

5) Hexavest

6) 1832 Asset Management

7) Jarislowsky, Fraser

8) Connor, Clark & Lunn Investment Management

9) TD Asset Management

10) CIBC Asset Management

11) Beutel, Goodman & Co

12) Greystone Managed Investments

13) Mackenzie Financial Corporation

14) Great West Life Assurance Co

15) Guardian Capital

16) Scotia Capital

17) AGF Investments

18) Montrusco Bolton

19) CI Investments

20) Venator Capital Management

21) Van Berkom and Associates

22) Formula Growth

Pension Funds, Endowment Funds, and Sovereign Wealth Funds

Last but not least, I the track activity of some pension funds, endowment and sovereign wealth funds. I like to focus on funds that invest in top hedge funds and have internal alpha managers. Below, a sample of pension and endowment funds I track closely:

1) Alberta Investment Management Corporation (AIMco)

2) Ontario Teachers' Pension Plan

3) Canada Pension Plan Investment Board

4) Caisse de dépôt et placement du Québec

5) OMERS Administration Corp.

6) British Columbia Investment Management Corporation (bcIMC)

7) Public Sector Pension Investment Board (PSP Investments)

8) PGGM Investments

9) APG All Pensions Group

10) California Public Employees Retirement System (CalPERS)

11) California State Teachers Retirement System (CalSTRS)

12) New York State Common Fund

13) New York State Teachers Retirement System

14) State Board of Administration of Florida Retirement System

15) State of Wisconsin Investment Board

16) State of New Jersey Common Pension Fund

17) Public Employees Retirement System of Ohio

18) STRS Ohio

19) Teacher Retirement System of Texas

20) Virginia Retirement Systems

21) TIAA CREF investment Management

22) Harvard Management Co.

23) Norges Bank

24) Nordea Investment Management

25) Korea Investment Corp.

26) Singapore Temasek Holdings 

27) Yale Endowment Fund

Below, it's the time of the season when investors are awaiting the SEC 13F filings from major hedge funds. CNBC's Leslie Picker reports on how some of the biggest hedge funds handled the fourth quarter volatility.

And Bloomberg’s Alix Steel and David Westin report on how much hedge fund titans made in 2018. You can read the Bloomberg article on the best-paid hedge fund managers of 2018 here.


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